Sales & Marketing Study 2018: New Product Development
A Made to Order Marketplace
The average category leader in a brick-and-mortar store has a 13% market share online, according to IRI. Launching a few new flavors isn’t going to fix that.
Nearly half (49%) of the 200 top-selling packaged goods launches in 2017 came from small suppliers with annual revenue of less than $1 billion, according to IRI’s “New Product Pacesetters” report for 2017. What’s more, 40% of the food and beverage products and 25% of the non-food items in that total were launched by brands new to the marketplace. With Millennials far less likely than previous generations to select traditional, mainstream brands, and with the digital age making it far easier for these consumers to find alternative brands that better match their own preferences, consumer goods companies can no longer rely on brand extensions or “new and improved” product attributes to add much incremental revenue.
The perfect example has been well scrutinized: ongoing efforts by Procter & Gamble’s Gillette to top the prior year’s “innovation” (and dollar growth) with features and benefits that helped more to increase razor prices than to provide real consumer value. While P&G succeeded in driving incremental growth, it also left the door wide open for startups Dollar Shave Club and Harry’s, Inc. to leverage the internet, solve for real consumer needs (price, ease of purchase) that Gillett e had been ignoring, and steal share.
“You have to create new and unique value,” says Zahir Dossa, who launched Function of Beauty to deliver “hyper-ultra personalization” in personal care. The 2-year-old company’s shampoos and conditioners are formulated differently for each specific shopper — whose name is then placed on the bottle. (12 billion formulations are possible.) “You take [your] brand completely out of it and give it to them,” Dossa says.
Personalizing the Product
While most CGs aren’t taking their brands out of the equation just yet, many are testing the personalized product waters. For one, Nike’s “By You” collection lets consumers build their own shoes, starting with the type and including materials, colors and other features. “By allowing consumers to design and develop their own shoes, Nike is effectively transforming portions of its innovation process from company-led to consumer-led,” Mark Osborn, vice president of digital strategy & business planning at SAP, said in a recent blog on consumergoods.com.
“Previously, Nike would have commissioned expensive, qualitative consumer research studies to predict shifting needs and preferences, and then interpret the findings to make big bets on product innovations and extensions,” Osborn explained. “Now, Nike delivers an entirely personalized experience for the consumer while gaining real-time insights at a macro-level into broader shift s in preferences — all at no incremental R&D cost.”
Personalizing the Process
Nike isn’t quite turning the entire innovation process over to consumers. But it is addressing an important shopping trend while also gathering critical intelligence to fuel the internal NPD process — which, if it isn’t clear already, needs to be far less internal than it used to be.
“Membership serves our consumer, and membership serves our business,” said Adam Sussman, Nike’s chief digital officer, about NikePlus, the brand’s app-centered loyalty program. The program has 100 million-plus members worldwide who have become de-facto contributors to the innovation process. “All the data drives optimal product recommendations,” Sussman told the audience at ShopTalk in March.
Similarly, Conair’s Cuisinart tracks social media sentiment to help drive its innovation, modifying existing products and developing new ones based on what consumers are saying. By gaining a better understanding of consumer need ahead of time, “You can save yourself a lot of time and money when you’re engineering a product from scratch,” noted Mary Rodgers, the brand’s director of marketing communications.
Another strategy that’s becoming more commonplace among larger CGs is the use of accelerators or incubators that find emerging brands with potential and shepherd them through the growth process — going the adoption route then birthing the babies themselves, so to speak.
In May, Kraft Heinz presented the first round of recruits for Springboard, a platform the company unveiled in March to nurture, scale and accelerate the growth of “disrupti e brands.” Among the initial wave were low-carb chips made from egg whites (Quevos), beverages made from aronia berries (Poppilu), and a 400-year-old family recipe for beef jerky (Ayoba-Yo).
Personalizing Beyond the Product
Companies also are using these incubators to find and foster new technologies that can help with another critically important aspect of new “product” development: improving consumer engagement and loyalty by enhancing the overall brand experience. These days, a brand’s ability to simplify the fulfillment process can be just as important as the product itself.
For instance, Dirty Lemon Beverages co-founder Zak Normandin thinks the company’s unique fulfillment model — direct delivery on orders that can only be placed via text message — is as important to success as the healthy juices it sells.
“Technology provides the ability to offer service beyond the product itself,” explained Martin Aubut, chief digital officer for L’Oréal Canada, which is on the lookout for tools that will improve the shopper’s path to purchase — as well independent brands that can enhance the portfolio.
“Stop worrying about launch success and [instead] worry about customer lifetime value,” said Aubut, while speaking in March at an event.
His point? Even new product development needs to adopt a stronger focus on the consumer.
To read the rest of the 2018 Consumer Goods Sales & Marketing Study, click on the links below:
- Editor's Note: Confronting the Consumer-Driven World
- The Progress Report: 'Improvement' Is for Losers
- Organization: Taking the '&' Out of Sales & Marketing
- New Product Development: A Made to Order Marketplace
- Data & Analytics: Going Deeper with the Data
- Trade Promotion Management: Working Off the Same Page
- Consumer Engagement: Something to Talk About
To download a PDF of the full report, click on the attachment below.